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just uninstall the older version and then reinstall the game - your saves should be fine

uninstall you mean delete the folder?

and extract new 1?

no? If you don't already have the option to update on the bottom right corner ( I assume you're using the Itch.io app and not webpage) you go to the cog next to launch button to manage the game and if it says v0.1.2.2 as your main file to manage you'll want to either A. Uninstall it than install the new update or B. install v0.1.2.3 ( the new update) which should overwrite the old update and keep your save files without having to transfer them

Are the save files located outside the game folder?

(+1)

No, you should copy the “Log” file and paste it in the new updated games folder. The “Log” file has all your saves stored in from all previous versions also.